VIX Options and Futures Weekend Review for January 27 2018

VIX was lower last week, but that’s the only thing that lost value on the table / term structure chart below. All the futures moved higher despite VIX moving lower, but also shaking off a very bullish week for the S&P 500. We live in unusual times and there is much being written about the VIX behavior which seems to be ignoring record S&P 500 moves. Usually this disconnect rights itself with either stock prices dropping or VIX finally giving into the reality of a higher S&P 500.

Before moving on to a trade I’d like to note that on Friday there was a seller of just over 25,000 VIX Feb 7th 21 Calls who was able to get the whole trade crossed with two counterparties in VIX pit at Cboe. I don’t know if they are short the calls versus futures, speculating, or what. I just wanted to note how a large trade is being done in the non-standard expirations.

For a trading example I’m sticking with the Weeklys, but reporting on a smaller trade. First thing Friday, with VIX around 11.60, there was a trade buying the VIX Feb 7th 13 Calls for 0.69 and selling the VIX Feb 7th 21 Calls for 0.10 resulting in a net cost of 0.59. The hope behind this trade is for a move to the mid-teens between Friday and a week from Wednesday. The only big number I came across was January employment next Friday, but as skittish as the stock market has been, it may not take too much news to push VIX to levels this trade is hoping for.